Kuleana Llc, Apps v. Diversified Wood Recycling, Inc., Resp

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
KULEANA, LLC, a Washington C^3: O") o
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limited liability company; and HAROLD No. 68962-2-1 t^.3 '''"'. "'
E. JOHNSON, a single person, ' ' - _-
DIVISION ONE
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Appellants, ro
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DIVERSIFIED WOOD RECYCLING, UNPUBLISHED OPINION U3 ~": •<"
INC., a Washington business
corporation,* FILED: July 22, 2013
Respondent.
Becker, J. — This appeal is a sequel to this court's earlier decisions
involving a judgment entered in Spokane County Superior Court on a lien
foreclosure action. Diversified Wood Recycling. Inc. v. Johnson, 161 Wn. App.
859,251 P.3d 293. review denied. 172 Wn.2d 1025 (2011); Diversified Wood
Recycling. Inc. v. Johnson. 161 Wn. App. 891, 251 P.3d 908. review denied. 172
Wn.2d 1025 (2011). Appellants seek to avoid the judgments affirmed in those
two appeals. We affirm the trial court's decision to dismiss their complaint on
grounds of res judicata and collateral estoppel.
The lien in question was claimed by Diversified Wood Recycling Inc.
Diversified performed brush clearing work. Diversified performed that work at the
*On June 17, 2013, a notation order was entered granting First American Title
Insurance Company's motion to substitute First American in place of Diversified Wood
Recycling Inc.
No. 68962-2-1/2
request of a Harold Johnson. Diversified's invoices sent to a Harold Johnson
were never paid. Diversified recorded a claim of lien on the property where the
work was performed, which according to title records was owned by Harold
Johnson. Diversified then filed and served a foreclosure action naming Harold
Johnson as defendant. Harold Johnson, Jr., answered the complaint.
After a two-day trial, the court entered a judgment of foreclosure against
Harold Johnson, Jr. After judgment was entered, Harold Johnson, Sr. and his
solely-owned company, Kuleana LLC, brought a motion to intervene in the
foreclosure action for the purpose of moving to vacate it. Johnson Senior alleged
that he or his company were record owners of the property identified in the claim
of lien. He argued that the action was void because neither he nor his company
had been joined or served in the foreclosure action. The trial court denied the
motion to intervene.
Two separate appeals followed in which this court affirmed the judgment
of foreclosure and the order denying the motion to intervene. That both Harold
Johnsons lost their respective appeals was due in large part to the confusion
they themselves generated by merging their identities for certain business
purposes. "Because the two Harold Johnsons effectively held themselves out as
the same person without making it possible for Diversified to distinguish between
them at the time of recording the lien and filing suit, the trial court legitimately
treated them as the same person for purposes of deciding whether Diversified
complied with statutory requirements." Diversified, 161 Wn. App. at 882. Other
facts relevant to those two appeals are well known to the parties and are
No. 68962-2-1/3
discussed at length in the two previous appeals. We will not repeat them here
except as necessary to resolve the present appeal.
Johnson Senior and Kuleana brought the present action against
Diversified in Spokane County Superior Court in January 2012 as a complaint for
declaratory judgment and to quiet title. They presented the same deeds that
were submitted as exhibits in the foreclosure action. They alleged that the deeds
prove they have ownership interests in the property described in Diversified's lien.
They asked the court to declare that they are the sole owners of the property
described in their deeds, that their interests in that property are not affected by
the foreclosure because they were not joined as parties, and that Diversified has
no claim against the cash supersedeas they deposited in the lien foreclosure
action. The trial court dismissed their complaint upon Diversified's motion for
summary judgment. This appeal followed.
Summary judgment is reviewed de novo. Summary judgment is proper
only if, from all the evidence, reasonable persons could reach but one
conclusion. Wilson v. Steinbach. 98 Wn.2d 434, 437, 656 P.2d 1030 (1982).
Collateral estoppel, also known as issue preclusion, bars relitigation of
issues of ultimate fact that have been determined by a final judgment in actions
involving the same parties. State v. Williams, 132 Wn.2d 248, 253-54, 937 P.2d
1052(1997).
The elements necessary for collateral estoppel are present here. A final
judgment on the merits, in an action involving the same parties, prevented
appellants from intervening in the foreclosure action. Appellants now seek to
No. 68962-2-1/4
establish their ownership of property described in their deeds as part of a quiet
title action against Diversified. The ownership of the property covered by the lien
was at issue in the foreclosure action. See Diversified, 161 Wn. App. at 883-85.
And it was also an issue litigated in connection with appellants' motion to
intervene. Their lack of coherent proof of the property interests in question was
one of the reasons we affirmed the trial court's denial of the motion. We
examined the inconsistent and poorly documented positions taken by appellants
and said, "It is not clear exactly how much property they each claim to own or
where such property is located in relationship to the property that was described
in the claim of lien and that was foreclosed on by the judgment." Diversified. 161
Wn. App. at 899. Appellants do not explain why they should be permitted to
relitigate, against Diversified, the issue of whether property they own is included
in Diversified's lien.
It appears appellants are also attempting to relitigate whether Diversified
properly maintained its claim of lien, so as to be entitled to be paid from the
proceeds of the foreclosure sale. The judgment of foreclosure decrees that
Diversified has a lien on certain described property. It orders the sheriff to sell
the property at auction and, after applying the proceeds to the costs of sale, to
distribute the proceeds to Diversified for all amounts due under the judgment,
including interest, attorney fees, and costs. Appellants do not expressly say that
by proving their ownership interests in the present action, they intend to prevent
the property they claim to own from being sold at auction to satisfy Diversified's
lien. But they do not explain, and it is hard to imagine, what other practical
No. 68962-2-1/5
objective they could hope to accomplish by means of their present action against
Diversified.
Collateral estoppel must not be applied to work an injustice. "The
question is always whether the party to be estopped had a full and fair
opportunity to litigate the issue." State Farm Mut. Auto. Ins. Co. v. Avery, 114
Wn. App. 299, 304, 57 P.3d 300 (2002). Johnson Senior had ample notice of the
pending foreclosure action, and he knew it was aimed at property in which he
and his company claimed an interest. Diversified, 161 Wn. App. at 899-900. He
and his company had a full and fair opportunity in the earlier action to show some
impediment to selling the property at auction to satisfy Diversified's lien.
"If an owner who has been served but not joined does nothing, the
property will be sold at auction to satisfy the lien." Diversified. 161 Wn. App. at
904. We conclude Johnson Senior and Kuleana are barred from relitigating
whether Diversified is entitled to be paid from the proceeds of a foreclosure sale
of the property identified in the lien.
The present action is also barred by res judicata. Res judicata is claim
preclusion. It bars relitigation of a claim already determined by a final judgment
involving the same parties. Williams v. Leone & Keeble, Inc.. 171 Wn.2d 726,
730, 254 P.3d 818 (2011). To make a judgment res judicata in a subsequent
action there must be a concurrence of identity in four respects: (1) of subject-
matter; (2) of cause of action; (3) of persons and parties; and (4) in the quality of
the persons for or against whom the claim is made. Seattle-First Nat'l Bank v.
Kawachi. 91 Wn.2d 223, 225, 588 P.2d 725 (1978).
No. 68962-2-1/6
Kuleana and Johnson Senior assert that their present action does not
have identity of subject matter or cause of action with the lien foreclosure action.
They say that the present action involves the priority of the respective interests of
Diversified, Kuleana and Harold Johnson Sr., whereas the underlying action
involved the validity and foreclosure of the lien against the property.
Res judicata does not bar claims which arise out of a transaction separate
and apart from the issue previously litigated. Kawachi, 91 Wn.2d at 227-28. But
appellants fail to demonstrate that their present action is separate and apart from
the underlying foreclosure action. In the present action, they want a declaration
that they have property interests which remain unaffected by the foreclosure.
This is the same subject matter they were litigating when they sought to
intervene in the foreclosure action.
In the lien foreclosure action, Johnson Junior alleged that Johnson Senior
and Kuleana were owners of the property. Johnson Junior argued that
Diversified's failure to join Johnson Senior and Kuleana as parties to the
foreclosure action meant that the action was void for lack of subject matter
jurisdiction. Johnson Senior supported that argument by asserting in a
declaration and by testimony at trial that he and Kuleana had interests in the
property. When this argument was unsuccessful at trial, Johnson Senior and
Kuleana moved to intervene postjudgment. While we upheld the foreclosure
judgment and the denial of intervention, we did not decide whether or not
Johnson Senior and Kuleana were owners of any of the property included in the
lien. That decision was not necessary to resolve the issue before us at the time,
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No. 68962-2-1/7
namely whether the trial court was barred from proceeding with the foreclosure
action absent joinder of the owner. We explained:
The consequence of nonjoinder of the owner or any other person
who has a prior recorded interest in the property is not lack of
jurisdiction. Nonjoinder of the owner does not mean the lien
expires or that the court lacks statutory authority to proceed. The
consequence is that the interest of a person not joined may not be
foreclosed or otherwise affected.
Diversified. 161 Wn. App. at 903.
Appellants contend that in their present action, they are merely trying to
enforce the statement quoted above. In reality, their present action is an attempt
to litigate matters that were or could have been litigated when they moved to
intervene in the foreclosure action.
First, in this action just as in the attempted intervention in the foreclosure
action, the subject matter is the ownership interests purportedly held by Kuleana
and Johnson Senior. Second, the cause of action is the same because it arises
out of the same transactional nucleus of facts involved in the foreclosure action,
presents substantially the same evidence, and is designed to impair Diversified's
established right to be paid in satisfaction of the lien. See Hadlevv. Cowan, 60
Wn. App. 433, 441-42, 804 P.2d 1271 (1991). Third, the same parties are
involved: Diversified on one side, Kuleana and Johnson Senior on the other.
Fourth, Kuleana and Johnson Senior have the same quality as they did in the
previous action, i.e., they are bound by the denial of their motion to intervene.
See Martin v. Wilbert. 162 Wn. App. 90, 97, 253 P.3d 108. review denied. 173
Wn.2d 1002 (2011).
No. 68962-2-1/8
Where both lawsuits arise out of the same transactional nucleus of facts
and the other prerequisites for res judicata are present, res judicata bars "every
point which properly belonged to the subject of litigation, and which the parties,
exercising reasonable diligence, might have brought forward at the time."
Savward v. Thaver. 9 Wash. 22, 24, 36 P. 966 (1894). To the extent appellants
argue their claim of priority ownership is different from the claim of ownership
they advanced in their motion to intervene, they are barred by res judicata
because that claim properly belonged to the prior litigation and should have been
included in it.
In summary, the trial court properly perceived the present action as an
attempt to relitigate matters already resolved by final judgment.
Diversified requests attorney fees on appeal under RCW 60.04.181.
Because the present action is not a lien foreclosure action, we deny this request.
Affirmed.
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WE CONCUR: